In their fight against the NYC’s fee cap law, third-party delivery apps have the backing of the country’s biggest lobbying group — the U.S. Chamber of Commerce.
The organization submitted an amicus brief to a New York federal judge stating that New York City legislation — which places a permanent 20% cap on delivery and non-delivery fees that online platforms can charge restaurants — is a price control ordinance that “harms the businesses” it claims to help and urged a federal judge to overturn the cap.
In the Chamber’s opinion, NYC’s fee cap will reduce consumer demand, leading to less revenue for restaurants and delivery drivers.
“The ordinance at issue here — which is directed at an extremely competitive and dynamic market — has already had (in its prior, temporary form) the harmful effects that are typical of price controls, and will continue to have those effects going forward,” the US Commerce’s brief reads. “To stay viable, platforms will have to try to pass along costs to consumers in the form of higher fees, and users of the platforms may suffer reductions in service quality, such as longer wait times and a smaller delivery radius.”
The contentious relationship between the delivery apps and New York City predated the pandemic, but it was deepened after NYC councilmembers, including former Councilmember Mark Gjonaj, a moderate Democrat from Throggs Neck, sought to challenge the “David vs. Goliath” playing field between small restaurants and platforms such as DoorDash, Uber Eats and GrubHub.
During the pandemic, the New York City Council placed a temporary 20% cap on delivery and non-delivery fees as well as the commissions that can be charged by third-party platforms from phone order fees for calls that did not result in completed order. Those temporary measures, which were set to expire on Aug. 17, 2021, covered the first three months of then-Gov. Andrew Cuomo’s statewide mandate lifting indoor dining restrictions.
The City Council approved a permanent cap in August, becoming the second U.S. city to do, which also caps transaction fees at 3% of the order total unless the delivery company can prove that a higher charge was imposed by a credit card company or another payment provider.
In the suit filed in September, the U.S. District Court for the Southern District of New York, DoorDash, Grubhub and Uber Eats called the fee caps government overreach. Third-party platforms have long opposed the permanent caps stating that it would limit how restaurants can promote or market themselves and invalidate lawful contracts between private businesses and violate the U.S. Constitution’s due process, equal protection clauses.
MarketWatch tracked revenues of the top four U.S. third-party delivery apps — DoorDash, UberEats, GrubHub and Postmates — and reported that the four companies generated roughly $5.5 billion in combined revenue from April 2020 through September 2020, more than twice as much as their combined $2.5 billion in revenue during the same period in 2019.
During the pandemic, more than 1,000 NYC food establishments shut their doors and city restaurants lost a reported $10.3 billion from March to November 2020.
“The [third-party] platforms were experiencing a dramatic increase on business while the restaurants were seeing a depletion of their business,” Gjonaj said in 2021.
Third-party delivery services state that in lieu of the delivery caps — which first went into effect in September 2020 and was originally meant as a temporary 90-day measure — New York City could’ve used its $3.4 billion budget surplus as another way to provide aid to local restaurants.
“We continue to believe that New York City’s price controls are unconstitutional, unnecessary, arbitrary, and ultimately harmful to the very restaurants they are intended to help,” a DoorDash spokesperson told the Bronx Times. “Every business is different, and restaurants who choose to partner with DoorDash can select the products and services that are right for them — we’ve made sure that they can even choose options that don’t have a commission at all. We stand by New York City restaurants and will continue to address this matter in court.”
There is a second, unrelated litigious matter between third-party food delivery apps and the city over a law that would require the company to share the data it collects on customers with restaurants.
Reach Robbie Sequeira at rsequeira@schnepsmedia.com or (718) 260-4599. For more coverage, follow us on Twitter, Facebook and Instagram @bronxtimes.
